Utility companies and their streetwork contractors digging up roads in London can now find themselves being charged up to £2,500 a day for working in congested areas and at busy times of the day.

Transport for London (TfL) has introduced the scheme in a bid to help cut congestion. Any profit from the scheme will go to research into new technology to reduce the disruption caused by roadworks.

London has become the first city in the UK to charge utility companies for the amount of time that they dig up the capital's busiest roads.

The scheme covers over 200 miles (57%) of the TfL road network, covering the areas most susceptible to major roadwork disruption. TfL itself is not exempt from the rules and the new scheme will also ensure that their works are delivered with minimal disruption. However, around 70% of TfL works are currently carried out outside of peak hours, compared to around 20% of utility works.

More than 270 police community support officers (PCSOs), who are funded by TfL, will monitor roadworks, together with TfL officials. Londoners are also being encouraged to grass up contractors using Twitter (tweet @report_it with the hashtag #roadworks).

London introduced a permitting scheme for roadworks in January 2010, since when serious and severe disruption caused by roadworks on London's key red routes is down by almost 40%, TfL reckons.

The target for the lane rental scheme is to reduce disruption by a further 33% or 165 hours of disruption a year by 2015.

London mayor Boris Johnson said: “Lane rental is a vital addition to our arsenal. Setting the meter running the moment the first cone appears will finally make utilities understand the full economic cost of their work. It will encourage companies to work round the clock, team up and share trenches or develop new technology to speed up their work. Lane rental will keep traffic moving, and promote peace on our roads.”

Money raised through the lane rental scheme will help fund a joint research project set up last year by the Department for Transport and TfL to develop new technology to reduce the disruption caused by roadworks.

The 18-month project, run by the Transport Research Laboratory (TRL), is examining innovative engineering techniques that could see utilities use temporary road surfacing methods such as plating, fast-setting replacement road surfaces or more innovative methods such as core and vac techniques, which allows utility works to be carried out under the road surface without the need to excavate a large area of the road surface.

All these methods would allow both TfL and utility companies to carry out more work at quieter times, meaning that more roads could be re-opened during peak traffic periods, cutting delays and disruption across the capital.